The pitch – A new kind of global law firm emerges but can Dentons live up to the hype?

A dismissed also-ran, Dentons has improbably reinvented itself as a pioneer taking legal globalisation to new heights. Critics snipe but can the firm live up to the soaring rhetoric?

‘We’ve obviously grown faster than any law firm ever,’ says Dentons’ iconoclastic chair Joe Andrew as he loads up a presentation designed for potential global suitors. Sitting alongside chief executive and friend Elliott Portnoy they make a slick pair, unsurprising given that this presentation has been practised on more than 100 law firm leaders around the world. The batting average was impressive in 2015. In a breakthrough year, six law firms across the US, China, Australia, Singapore, Colombia and Mexico agreed to join Dentons in a spree without precedent in the legal industry. A law firm written off as a global player in most quarters had become on some measures the world’s largest firm. Actually, it achieved that distinction less than a month into 2015 with the headline-grabbing tie-up with 4,000-lawyer Chinese giant Dacheng. Many in the profession are quick to predict a dramatic fall for this empire but everyone is talking about a firm that two years ago didn’t get a second thought.

Andrew and Portnoy have been the driving forces behind that reinvention. Both highly connected DC lawyers, Andrew has ties to the Democrats and the camp of President Barack Obama. Portnoy, meanwhile, transformed a second-line Chicago player, Sonnenschein Nath & Rosenthal, into the foundation for a global giant in a little over five years. It seemed unlikely that Andrew, a man raised on a farm in Poe, a small town near Fort Wayne in the US, would radically shake up a firm without any foreign offices a decade ago into a 7,500-lawyer giant sprawled across 130 offices globally. Some – particularly firms with more prestigious market positions – see a house of cards; others see visionaries.

They certainly know how to make a case, setting out ‘12 transformative transactions’ Dentons secured in 2015, as Legal Business sat through a slightly edited version of the three-hour pitch they give prospective suitors. Says Andrew: ‘Any one of these [deals] could be transformative on their own but together they’re historic.’ Split over nine chapters, the presentation is audacious in its message, coherent and even mercifully economical on corporate jargon: this is a purer kind of globalisation, a kind the profession has never got close to executing. The 10,000-lawyer firm is in sight and Dentons has a wealth of research to back its case (Andrew and Portnoy being avowed data freaks).

But it is the folksier parts of the pitch that resonate. Take this from Andrew: ‘There are so many different paths to success for a law firm, what I am always amazed by is not that there are firms that struggle and fail but how few struggle and fail. Of the 250 largest law firms of the US over the past 20 years, of which there have been about 400 firms in that list, only four have failed. Imagine any other business line where only four out of the top 400 businesses fail. The legal business is a pretty safe business and therefore firms with different strategies can all succeed.’

In truth no-one quite knows what to make of a strategy with no real comparison. Even the firm that became DLA Piper during its late 1990s/2000s heyday didn’t break the rules with this much gusto. One leader of a top ten firm sums up a common observation: ‘I’m loathe to say Dentons will fall apart and never work as they said that about DLA Piper and it did work. But it is trying to defy the law of gravity in the legal world. I can’t help feeling it’s a bunch of firms who are in trouble doing a big PR stunt.’

Aric Press of US consultancy Bernero & Press comments: ‘Dentons’ great achievement thus far has been one of brand recognition. Instead of being another undifferentiated Chicago firm, a wounded British outfit or confused with the old manufacturer of pyjamas, Dentons is suddenly known as the largest law firm in the world. Potential clients will have heard of it now. Whether that translates into serious new business across its sprawling network remains to be seen.’

It’s a fair question. Whether it is Dentons or its sizeable band of detractors that are ultimately proved right will be one of the defining moments for the global legal industry.

A tough start

The union of London’s Denton Wilde Sapte (DWS) and Chicago stalwart Sonnenschein Nath & Rosenthal in 2010 was the backbone of the current Dentons but it was hardly a promising tie-up. While the London firm had some international profile as one of the UK’s 20 largest firms, with £167.5m revenue during 2009/10, DWS had weathered a very troubled decade. Its larger partner Sonnenschein was little known outside of the US. Those that did remember the firm in the Square Mile recalled its distinction as one of the very few sizeable American players to pull the plug on a London arm. As one ex-partner comments: ‘The merger was a surprise and lots of us had to Google Sonnenschein! I’d never heard of them.’

Helping to secure the deal, Sonnenschein had taken on 100 lawyers in 2009 from New York’s Thacher Proffitt & Wood, doubling its New York presence and raising its attractiveness to international partners. Portnoy, a charismatic figure and a successful practitioner hand-picked as chair two years earlier by the retiring Duane Quaini, had inherited a sleepy firm struggling to keep pace with Illinois rivals such as Kirkland & Ellis and Mayer Brown during the 2000s, let alone assert itself on the wider national and global stage. Says one US consultant: ‘Portnoy realised the firm was irrelevant in the legal market, so why not try something completely different that would make it relevant?’

Securing the team from Thacher Proffitt – a pioneer in structured finance that had been terribly wounded by the banking crisis – had been lucky. Sonnenschein swung in opportunistically after King & Spalding, which was set to acquire the firm, got cold feet at the 11th hour. Nevertheless, Sonnenschein was facing severe headwinds. Its profitability was the worst hit of any major Chicago firm by the time of the financial crisis, dropping 15% from $915,000 in 2007 to $780,000 in 2009.

Not that Dentons could be too picky. The firm never hit its stride after the 2000 union of Denton Hall and Wilde Sapte. Wilde Sapte had been turned down by UK peers Travers Smith and Lovells, in part thanks to a £10m overdraft. But it was the last-minute collapse of its agreed deal with the Andersen Legal network in 1998 that had done much of the damage. Denton Hall, meanwhile, had narrowly missed out on a tripartite merger with Richards Butler and Theodore Goddard in 1998 after a vote.

The much-admired finance team of Wilde Sapte also lost a string of key partners through the 1990s, with heavyweight banking trio Nick Syson, James Johnson and Jonathan Shann leaving at the time of the merger to join Linklaters, Clifford Chance and Freshfields respectively. One ex-partner at Wilde Sapte says that ‘anyone who was good enough to move, moved’ and ‘there was an even bigger haemorrhaging below the surface’ with departing associates including Christopher Howard, Ian Barratt, Emma Folds, Bruce Bell, Philip Spittal and Brian Gray all going on to become rainmakers at top City firms. DWS also suffered in 2005 with the departure of a respected 11-partner IP and media team to DLA, taking £10m in annual billing. Profitability continued to lag peers and in 2004 it took the drastic step of shutting its 50-lawyer Asia network. Through the 2000s DWS was one of the worst-performing firms in the UK top 50.

The City firm appeared an ideal candidate for a fixer-upper deal with a larger partner – perfect for Portnoy and Andrew, who after being hired by Portnoy in 2004 had become his right-hand man and a major biller. But most of all they were available, having been on the block since Squire Sanders & Dempsey shifted focus from DWS to secure a UK tie-up with Hammonds. DWS chief executive Howard Morris and chair Martin Kitchen agreed for Portnoy and Andrew to take the top jobs for a transatlantic union under the name SNR Denton, with Portnoy as global chief executive and Andrew’s elevation to chair sealed as part of the governing deed.

One former DWS partner recalls: ‘Joe and Elliott are a bit cavalier. I don’t think they did much financial due diligence but they were very convincing. You could see they were guys who wanted to do something interesting, dynamic, innovative and novel. I like both of them and have a very high regard for them. But the DWS brand was pretty screwed as a lot of partners had left.’

Few doubted the union was a better prospect than continuing with the status quo but even the most on-message Dentons partner concedes that the first two years were troubled as DWS had stored up problems, in part due to lax financial management. The UK business made just £237,000 profit per equity partner (PEP) for 2010/11, 34% lower than the £360,000 achieved in the run up to the merger (in contrast the US partnership saw its PEP up 15% to $827,000 in 2010).

It was a blow for Portnoy and Andrew, according to several accounts, with one former partner claiming it was a ‘colossal embarrassment to the Americans that they bought something much less profitable than they’d realised’. The duo were facing serious questions over their futures.

Part of the solution

The first SNR Denton partner conference in Orlando in 2011 went down in the firm’s folklore. The troubles were ignored at the main event but a meeting between Portnoy and a group of influential UK partners, including corporate heavyweight Richard Macklin, energy partner Christopher McGee-Osborne, restructuring partner Nigel Barnett and UK corporate head Matthew Jones put the issues on the table. While Morris was liked, the consensus was that he had taken a light touch with underperforming partners and the firm’s finances had been undermined by poor property deals. The message to Portnoy was clear: a change was needed. Morris called a partners’ meeting in London the following week to announce his resignation and newly-created role of global head of integration, requiring a move to the US. While there were expectations that Morris would return to the London office and resume a fee-earning role, it did not bed down. Morris quit to join Morrison & Foerster in late 2013.

Portnoy flew to London to oversee the change in leadership, announcing Jones had been selected as the UK’s next chief executive in 2011. This low point became a defining moment for Portnoy and Andrew and the direction Dentons was to take. Comments one ex-partner: ‘Dentons had an appallingly bad year and until that point the Americans didn’t think of doing other mergers. But Elliott and Joe thought that if it got back to their partners how badly the UK verein had done they would have lost their jobs, so they started this whole building of the firm in order to reduce the significance of the UK LLP. We were way, way, way below budget. It was like something out of the politburo and was completely stage-managed. Elliott and Joe invited the partners they thought were important in the UK firm to a drinks party on the Saturday evening and they told Joe and Elliott how bad things were. On the Tuesday Elliott was in London and Howard stood up and said: “I realise I’ve become part of the problem and not the solution.”’

With Portnoy and Andrew’s positions reinforced, the balance of power shifted further towards the US arm. A tougher line on performance was instituted, including an overhaul of how profits were divided.

The modified lockstep used in the UK region, of which 75% of partner pay was based on time spent and 25% a merit-driven bonus, was scrapped in favour of a points system tied to recent performance. Governance for the UK was overhauled, with a new board created to oversee strategy and management made up of big billers including Macklin, McGee-Osborne, Barnett, corporate partner Jeremy Cohen, technology partner Scott Singer and project finance specialist Neil Cuthbert. The UK partnership deeds were changed so that the new board was appointed rather than elected.

‘I’ve never met a firm that wants to be taken over. Every time someone new joins we create a new firm.’
Joe Andrew, Dentons

 

 

Cohen, who in March 2015 replaced Jones as UK, Middle East and Africa chief executive, recalls: ‘We found ourselves having difficulties and issues around merit-based allocation of credit and were doing all that for only 25% of the actual profit pool. You had the benefits of the lockstep but the bonus didn’t really move the dial for anyone. We wanted to encourage people to be entrepreneurial with a structure where even if you’re really young you can climb up and get into the equity.’

While the culture was beginning to change in the UK, PEP bounced back during Jones’ first year in charge and Brandon Ransley, who joined in 2008 from Howes Percival where he was Milton Keynes managing partner, was charged with reducing property costs. Ransley freed Dentons from leases on three expensive City offices, including an unoccupied property on the Strand and two Chancery Lane buildings, and consolidated its lawyers in one London office.

The increased rigour and focus on performance was overdue – and Ransley in particular wins praise for getting Dentons’ UK finances in shape. But the hard-line tactics and apparent imposition of Jones unsettled some.

Rebooting the practice took time, with Dentons struggling to attract strong lateral hires and a number of notable practitioners departing in the wake of the US tie-up. There remained, however, a number of big hitters within its energy, corporate and TMT practices. The firm’s Middle East and Africa practice was also well regarded, positioning Dentons in an increasingly important area of the global economy. Macklin, one of the firm’s few standout corporate partners in Europe, used this to good effect and built up strong relationships with the likes of Richard Branson’s Virgin and French energy giant Total through African deals. He also handles relationships with Nokia, Sainsbury’s and private equity house Kohlberg Kravis Roberts (KKR). One Magic Circle partner comments: ‘Most decent lawyers in town have carried the bags of someone good and that’s how they become a good lawyer. Richard’s one of a few very good self-trained lawyers in town. He’s tremendous.’ Other stand-out performers in London include financial litigator Richard Caird.

With the recovery of PEP in the UK and the rising fortunes of the US practice, the situation was improving but SNR Denton was still playing a weak hand. It was against this backdrop that Portnoy and Andrew would soon demonstrate their gamblers’ instinct and ambition.

In November 2012, Portnoy and Andrew substantially reshaped the firm with the three-way union with Salans and Canadian practice Fraser Milner Casgrain (FMC), adding 1,400 lawyers across North America and Europe. The deal gave Dentons genuine global scale, a much bigger presence in mainland Europe and a well-run Canadian business. It also ushered in the ‘polycentricism’ that Dentons was to make central to its sales pitch – despite much sniggering.

Salans veteran Tomasz Dabrowski, now Dentons’ Europe chief executive, argues: ‘Salans brought the polycentric model. Paris was the largest office for some time but we had no HQ and no dominating culture. Thanks to this model we were able to attract major law firms in Asia. Our model is unique.’

While Salans had fared relatively well following the financial crisis, it was becoming increasingly difficult to compete as a global law firm without a major UK or US practice as more US firms expanded internationally and it was not regarded as the most cohesive partnership. But Salans was the most global of any legacy firm under the Dentons brand, with 750 lawyers across 20 offices.

The merger also saw SNR dropped from the brand. In typically untypical style, Portnoy and Andrew made the move after commissioning a psycholinguistic study on the best name to project globally that considered 46 options. A similar process was carried out for the firm’s rebranding before deciding on the colour purple for distinctiveness (no other major law firm was using that part of the spectrum) with the arrow representing progress.

Peter Wolfson, Dentons’ US co-chief executive, puts it bluntly: ‘Sonnenschein was not a great brand. We had no presence outside the US and our clients wouldn’t come to us for international work. Frankly, I don’t think people knew what SNR was. So when we combined with Salans and FMC we made the decision that Dentons – as that’s what people were referring to us as even in the US – would be the brand. The brand is much stronger in the US as it’s seen as more international than Sonnenschein was.’

The magic of numbers

With coverage across Europe and North America secured through the Salans and FMC additions, Andrew and Portnoy were gaining conviction in their consolidation play. They entered 2014 looking for more deals. But nothing much happened.

Portnoy and Andrew perceived the UK and the US practices to be underweight but talks with US practice McKenna Long & Aldridge and Wragge & Co in the UK collapsed at the end of 2013 and early 2014.

Both talks got to an advanced stage, with one ex-partner commenting that ‘it got to the point where we were getting ready to meet our counterparts at Wragges before it all fell apart and was never spoken of again’. It is understood the UK firm decided against the deal.

Instead the year was defined by a lack of organic growth – revenue grew by just 2%, or $29m, to $1.275bn in 2014 – and the beginning of a bizarre public spat with The American Lawyer. Andrew and Portnoy went on to publish an open letter challenging AmLaw’s use of PEP as a measure for a global firm with multiple profit centres. Whatever the limitations of PEP and quibbles over methodology, the letter from Andrew and Portnoy was muddled in its logic and portentous. To many, the episode – which would escalate the following year when Dentons ran an ad campaign and created a website criticising the magazine – was ill-judged and squandered some of the grudging respect the pair were now amassing. In context, AmLaw had weakened its own position by not identifying its number as a market estimate but there were no peers rushing to join Dentons’ rallying cry against PEP.

If 2014 failed to provide much in the way of high-profile results – relentless efforts behind the scenes to bring in new partners would spectacularly build momentum through 2015. Just 22 days into 2015, Dentons unveiled a landmark merger with China’s Dacheng, a 4,000-lawyer firm with 44 offices across the world’s second largest economy. Dacheng had been looking at its options, having previously held talks with another major US practice and a firm in Europe. The discussions proceeded relatively quickly after beginning in the middle of 2014. It was the first time Dentons had matched the level at which the rhetoric of Andrew and Portnoy had been pitched at for several years.

While rivals cite the challenge of uniting with Dacheng – a sprawling firm regarded by many as well outside China’s legal elite (see box, ‘2015 and all that’) – Dentons was setting the agenda and projecting the brand in a manner that seemed unthinkable a few years previously. Portnoy and Andrew also made good copy when journalists reported the tie-up, more than can be said for many cautious US law firm leaders.

The union would set the ground for a remarkable series of deals: with McKenna Long, Australia’s Gadens, Singapore’s Rodyk & Davidson, Colombia’s Cárdenas y Cárdenas and Mexico’s López Velarde, Heftye y Soria. By the end of 2015 Dentons had deals in place to nearly triple the number of lawyers at the firm and add around $1bn in revenue.

Sizeable launches also took place in Italy, Hungary and Luxembourg last year, collectively adding more than 100 lawyers to the firm and, alongside the mergers, making up the bulk of Dentons’ ‘12 transformative’ moves during 2015.

‘Dentons is trying to defy the law of gravity in the legal world. I can’t help feeling it’s a bunch of firms who are in trouble doing a big PR stunt.’

The firm’s governance has been shaped to grow with every combination. The firm’s global board expands with every merger, rising from five to 25 partners in five years. Spots are allocated to each verein member by its relative revenue. While most law firms using Swiss vereins have maintained two or a handful of profit centres such as Norton Rose Fulbright, Hogan Lovells and DLA Piper, there will be ten firms operating under the Dentons brand in 2016. The current members are Canada (FMC), China (Dacheng), Europe (Salans), Hong Kong (Hammonds breakaway), UKMEA (DWS) and the US (Sonnenschein). Due to join are Australia (Gadens), Singapore (Rodyk), Colombia (Cárdenas) and Mexico (López Velarde).

Dentons’ model is built for speed in that the member firms are expected to unify around a number of global standards and join a central management function. Dentons makes little effort to interfere in local pricing and has minimal focus on targeting firm-wide PEP or pushing members to ditch local clients. But that position is more nuanced than some realise as despite the AmLaw campaign, Portnoy concedes: ‘We talk a lot about PEP locally.’ Dentons highlights that it has lifted PEP in the US above $1m in 2014 and wants to hike that figure further as it lags behind most peers.

Despite the scale – Dentons says it runs a unified conflicts policy and management believe the firm will have scaled up considerably in five years’ time. ‘I’ve never met a firm that wants to be taken over,’ says Andrew. ‘Every time someone new joins we create a new firm.’

‘The firms we have combined with are getting stronger: their brands are stronger, their economics are stronger, their position in their particular marketplace is stronger,’ says Andrew. This ‘stronger together’ message covers both investment and expenditure, with Andrew listing marketing, operational and technology costs that ‘go down because of economies of scale’ and stating how his ‘goal is to reduce cost per lawyer’.

Over the past two years Dentons has risen on the Acritas global elite law firm brand index, from 19th in 2013 to 14th in 2015. A range of other surveys are cited in the pitch, some persuasive, others more open to debate. What cannot be queried is the brand has been projected with striking success.

Portnoy’s task to ‘build the law firm of the future right now’ centres on greater geographic coverage and diversity. Of the 23 attributes Portnoy and Andrew expect law firms will strive to be in the future, the first four read: ‘more polycentric, more multi-cultural and diverse, more global in geography and more global in outlook’.

A key element of the strategy is building ultra-deep pools of specialisation, with Andrew arguing that larger teams are needed to provide clients with their three core demands: a wider experience, more local knowledge and more industry experience. The model is also based on bluechip clients concentrating global panels on fewer firms across borders. ‘Lawyers exaggerate on all three counts,’ says Andrew. ‘There’s an old law school joke about how a client calls a lawyer and before they’ve even finished explaining the task the lawyer has claimed to have the experience. Lawyers claim they have the experience 90% of the time but they often don’t. By having more lawyers we can cover more ground in sectors, practices and jurisdictions so there is less chance that we need to exaggerate. It’s just maths. Talent can be in a different place to where the opportunities are. That’s the magic of numbers.’

Andrew makes an interesting case that the momentum Dentons’ model has delivered is a huge edge in professional services. ‘Momentum is important when you’re in manufacturing. But when all you’re producing is based on people, they join us because of the momentum. The energy and excitement around is why people are joining.’

If the model has delivered consolidation at an unprecedented pace there is no getting away from how central Andrew and Portnoy have become to the Dentons project. It is also ironic that the ‘polycentric’ global law firm leans heavily for direction on its two US leaders and the firm remains driven by its US practice – even if the run of 2015 acquisitions have ushered in a more cosmopolitan dynamic.

The sprawling governance structure concentrates power in the hands of the duo. Considerable power also resides in the 13-strong global management committee, which is dominated by US figures (see box, ‘It’s big – running a giant’).

Perhaps the pair have been able to step outside the received wisdom of the profession because they frequently mix in other circles. Aside from the formidable political connections, Portnoy’s high-achieving wife Estee has run the business of US basketball superstar Michael Jordan for over a decade. Jordan jokingly calls Portnoy ‘the nanny’ as he appeared to be the one who stayed at home with their kids. Andrew, meanwhile, spends time relaxing writing books spanning thrillers and economics (his 1993 novel The Disciples chronicles a ‘game of spies’ in which ‘who holds the secrets holds the world’). One former partner jokes about the globe-trotting Portnoy sending messages to his colleagues headed ‘people of earth’.

These are not leaders in the style the US legal profession is used to and the pair received wide respect from current and former partners. One ex-partner comments: ‘They are evangelical leaders. I never remembered anything they said at partner conferences, I just remember how it was delivered and how smooth these two were. These are extremely slick guys.’

Andrew has become the prime architect of Dentons’ strategy, with Portnoy leading on execution. Luckily for a pair that spent the majority of last year flying around the world in search of mergers, they get along like a house on fire. Portnoy calls the personal relationship a ‘rare advantage’. He adds: ‘We were friends before we became partners and before we became leaders and that gave us the trust and confidence that is rarely seen in professional service firms. I’ve never seen such confidence in each other at a law firm and leadership without the constant looking over the shoulder and concern about portfolios or roles. We decide initiative by initiative who takes on what.’

Dentons’ UK real estate head Richard Budge says: ‘I wonder frankly when they sleep and eat because they are always somewhere. Many people are impressed by the strategic thinking, drive and energy. There’s no doubt about it they are very evangelical about the drive forward and enthusiastic about their ideas. If [you] are reserved in your approach you might be taken aback by it but there aren’t many people at law firms nowadays who would find that anything other than enthusing.’

Singer adds: ‘If you walk around the corridors here and spend time with partners, assistants, secretaries, people in the mailroom, there is a huge sense of pride, energy and excitement about what it is we’re doing. We’re trying to redefine the legal market. Joe and Elliott are the finest leaders of any law firm. They took what were regional firms and combined us into the world’s largest law firm in the space of five years and put us in a position where the second-biggest law firm is Baker & McKenzie at half our size.’

The pair are not without a few chinks in the armour. Several Dentons staffers describe the pair as letting emotions cloud their judgement and being carried away with off-the-cuff decisions. Likewise, when critically questioned during their pitch, the largely coherent vision on occasion gives way to defensiveness and contradictory statements that break the spell. Yet it is hard not to respect what the pair have achieved working in many cases with firms struggling to make a mark on their own.

Yes or no?

Dentons shows no sign of slowing its hunt for new partners – ‘We’re in the dating game’, remarks Andrew – frequently conducting multiple merger discussions at the same time. Andrew says ‘in 99% of cases [the talks] go nowhere’. The recent batting average suggests it is a few percent higher than that and rising.

One former partner jokes about Elliott Portnoy sending messages to colleagues headed ‘people of earth’.

 

 

In January 2016, Dentons secured a deal to take on a 75-fee earner banking and litigation team from Matthew Arnold & Baldwin, a move which incongruously sees it launch an office in Watford but also brings in volume banking work for Barclays, The Royal Bank of Scotland (RBS) and Santander (the legacy DWS had been relegated to a secondary adviser for RBS despite historic links to NatWest, while its Barclays relationship waned years ago).

Dentons cites aspirations to have more than 200 offices globally and more than 10,000 lawyers. This from a firm that nearly has more than twice as many lawyers as the next-largest law firm in the world. A key aim is to grow its US business, with Dentons wanting greater coverage around the energy sector in Texas. More deals are expected in Latin America and few would be surprised if Dentons pursued yet another major UK tie-up. A 23% hike in UKMEA profitability for 2014/15 taking PEP to just over £500,000 will help attract partners.

The practice remains mid-tier in the UK and uneven in the US but the London office has won first time panel appointments for Network Rail, Royal Mail and John Lewis in the past 12 months and even ex-partners admit ‘the firm has got better at is client focus’. Singer argues: ‘We are really winning these days.’

With Dentons having only completed its combination with Dacheng in November, there is also a huge opportunity for greater cross-selling as the Chinese government encourages state-backed companies to invest globally. Already one of the top three exporters of direct investment globally, a recent report by the research firm Rhodium Group and the Berlin-based Mercator Institute for China Studies projected that the country’s overseas assets would triple from $6.4trn now to nearly $20trn by 2020.

Restrictions around remuneration have also been removed, with the mainland Europe arm removing a 190-point cap on remuneration at the end of 2014. With each point worth around €2,400 that year, a ceiling of under €500,000 has been lifted to attract new talent.

Of course, Dentons has proved it can sweep up deals, a key question is how well it can manage what it has, especially when the pace of consolidation eventually slows. For all the momentum Dentons has generated, the firm has struggled to achieve meaningful organic growth in recent years in its core practices. This is notably true in the world’s two largest legal centres, the UK and the US, where revenue grew by 6% and 2% despite the transfer of legacy Salans offices into those regions. Europe was down 2% for 2014.

The calculation made by Dentons is that by sacrificing an integrated and highly prescriptive form of structure it can deliver rapid progress that can sweep along the whole. The logic is hard to fault. Many peers that have used verein structures appear to have ended up with the worst of both worlds – stuck with governance issues of the model without harnessing the flexibility and speed of consolidation the multi-profit centre structure allows for. Dentons has become the first law firm to take this approach to its logical conclusion and has to be given credit for following its convictions, or at least Joe Andrew’s convictions.

There is agreement that Dentons has had some success at managing, encouraging and tracking referrals across its huge global network thanks to well-run client management programmes, a key part of its business model. Even detractors concede that the firm’s ability to get its name on the minds of potential clients is an asset. Sceptical former partners concede there is a renewed sense of purpose at the firm; morale in the UK practice – for years pretty poor – has improved in the last two years.

‘I wonder when they sleep and eat because they are always somewhere. They are very evangelical about the drive forward.’
Richard Budge, Dentons

Nick Shilton, chief executive of Shilton Sharpe Quarry, concludes: ‘They have created an organisation that is genuinely in a category of one for scale and geographic coverage. There are very few firms that are unique but Dentons can stake the claim. Of course, there’s unique good and unique bad, and it’s the market that will ultimately decide which of those camps Dentons is in.’

Dentons faces its challenges. The US, which generates half its revenue and its anchor, has been an increasingly volatile legal market in recent years and is prone to damaging runs of partner exits. With McKenna Long already seeing a number of departures, avoiding major turbulence in the US will be key. Despite the polycentric pitch, a major reverse in the US is the most potent threat to Dentons’ momentum. And, like the proverbial shark, it is hard to imagine Dentons thriving without forward movement. Dacheng is Dentons’ wildcard – potentially a huge competitive edge that could drive the firm for decades, possibly an unmanageable irrelevance for the wider empire focused myopically on the huge Chinese market.

Succession and leadership are potential flashpoints. For a 7,500-lawyer giant, Dentons is singularly reliant on its two leaders. The pair have already indicated that they will stand again when their terms end in 2017, likely handing Portnoy his fourth leadership term and Andrew his third.

On the one hand, rapid growth and consolidation strategies have traditionally been risky in law, but Dentons’ scale, velocity and compartmentalised membership structure should go some way towards mitigating those risks. But then judging risks and prospects for Dentons is tough. This is a strategy without precedent.

As Bruce MacEwen of US consultancy Adam Smith Esq, who is in some respects a sceptic, comments: ‘This is the wildest experiment our industry has ever seen. Do I think this will work? Ask me in five years. But I like the speed and decisiveness with which they are acting, which is unheard of in our industry.’

‘This is the wildest experiment our industry has ever seen. Do I think this will work? Ask me in five years.’
Bruce MacEwen, Adam Smith Esq

Andrew concludes: ‘We haven’t yet found a jurisdiction that doesn’t either present an opportunity for our current client base or have lawyers we can connect to opportunities elsewhere. We know there are challenges that creep into the process, so we’re not pretending that there isn’t a limit to our growth. But the horizon for us is very far away and should be for all law firms. We have no idea how big a firm could be but we and our competitors aren’t close.’

Dentons is seductively close to becoming the first firm to take legal globalisation forward for 15 years – that alone is a significant achievement. A growing number of partners hearing that sales pitch will be saying yes and finding out where the ride ends. LB

tom.moore@legalease.co.uk

Additional reporting Sarah Downey